Failings by Capita Financial Managers in administering Arch cru funds could be partly blamed on advisers following a surprise legal move. Capita is being sued by over 1,000 investors for over £36 million, following the collapse of the fund manager in 2009.

It now says it wants to make financial advisers jointly liable if it is found liable for the losses.Capita has said that intends to issue a ‘Part 20’ claim against IFAs that recommended Arch cru funds to their clients. If accepted by the judge this would make advisers jointly liable for any damages awarded against Capita.

Capita’s move has proved highly controversial with experts. Philippa Hann of Clarke Willmott told Money Marketing: “Capita FM is saying: ‘If we are to blame, then the advisers who sold the funds are also to blame, and we will claim a contribution to the redress from them’. This is confusing two entirely separate issues: Capita FM’s responsibilities as an ACD and advisers’ responsibilities to their clients.

Gill Cardy, network development director of IFA network, ValidPath said: “What Capita FM is seeking to do is inappropriate beyond belief. If it believes there is a valid case against advisers to share in their losses, then advisers must have a valid case against Capita FM to share in their own losses – the argument cuts both ways.

If successful, the claim could be more bad news for the professional indemnity insurers. “IFAs already face a difficult PII market and this creates yet more uncertainty. Insurers will not want to be liable for losses resulting from mistakes by a third party administrator, and the conceptual basis for this is questionable. If Capita does issue a Part 20 claim against advisers we may hope this is swiftly rejected by the judge,” said James Burgoyne, Director – Claims & Technical, Brunel Professional Risks.

A report on the latest move in the long-running Arch cru saga has been published in Money Marketing.